SABMiller’s Emerging Market Presence Supports Performance
SABMiller Plc. perseveres in its 2013 performance regardless of a subdued volume growth and currency headwinds impacting its reported value sales and EBITDA growth.
Euromonitor reported a 1% growth in volume sales for SABMiller in line with their results and driven by its performance in emerging markets, but restrained by results in Europe and the US. SABMiller reported that value sales increased by 3% in organic constant currency terms, although faced a decline when adjusted to year-on-year exchange rate. In terms of its EBITA the company reported an expected 7% growth, but with the implication of weakened currency in South Africa and Latin America EBITDA witnessed a much smaller growth.
The company stated that they absorbed a sufficient amount of the currency movement via improved internal productivity and ongoing cost-efficiency in operations. Surprisingly, this was supported by positive value sales growth rates in Europe, and as expected from Africa. Furthermore, SABMiller’s minority-share partnership with Anadolou Efes in Eastern Europe shielded them from the impact of recent tax changes in Russia and the geopolitical situation in that region.
Relatively SABMiller’s key performance indicators did not surpass that of AB InBev’s for 2013. Yet, the former’s presence in over 73 markets allowed it to pacify the impact of declines in Europe and North America upon its global figures.
SABMiller’s biggest markets are the US, via its MillerCoors joint venture with an 18% share of its global volume sales and South Africa with a 14% share. The stagnant volume performance in the former and the depreciation of the Rand in the latter were key to the company’s 2013 performance. However, unlike Carlsberg, SABMiller is not too reliant on a few markets for its global performance, as its top four markets are located in four different continents with varying results.
SABMiller’s significant presence in sub-Saharan markets and Latin America prompted the company in attaining efficient internal operations. The company has to deal with the price competitive illicit alcohol trade, and with having to attract demand from low-income consumers in some of the lowest earning markets in the world. Applying a strategy of affordability, the global brewer had located cost-cutting initiatives that recued the logistics of operating in markets with less-developed infrastructures.
Unlike AB InBev’s Budweiser and Heineken’s eponymous Heineken, SABMiller does not have a significant global brand, and its global prowess is driven by localised or regionalised brands. As observed in the company’s brand list, its top selling beer brands Castle and Carling Black Label are primarily located in southern African markets. Although the company is attempting to extend presence with brands such Pilsner Urquell and Miller Genuine Draft, with the latter increasing its presence to 68 markets, although Euromonitor reported a decline in global volume sales of around 6% in 2013.
SABMiller’s outlook for 2014 looks much better as it is looking to expand on its key asset, its presence in emerging markets, especially in Africa. In January, SABMiller announced a US$110m investment in one of its Nigerian breweries to triple production capacity. Furthermore, the group is focusing on the female drinkers market in Africa, introducing sweeter beers to capitalise on the trend. The brewer will also look at the launching of near-beer alternatives to counter its volume decline in Europe and the US.